Mark Reynolds is one of the three founders of London-based Renaissance Pubs, which has just launched its sixth site, the Rosendale in Dulwich. He talks to Neil Gerrard about how Renaissance started, the tie, and the spate of pub firm takeovers in London
You started off running a restaurant with your business partners. How did that come about?
Tom Peake, Nick Fox [co-founders] and myself all met at university. I was working for another company after university - Party Ingredients - doing some outside catering and heard Tom was thinking of setting up a restaurant. We sat down and talked about how we were going to remortgage our flats and try and scrape together a few quid to get started. We ended up opening Cinnamon K, a little Australasian restaurant in March 2000.
Why did you decide to move into pub businesses? We made a calculated shift. Cinnamon K had been very successful and it was fun - lots of our friends had come down, and we were young and we were working five nights a week. But we were very much busy for the evening service. It was on Lavender Hill [in Clapham, London], which is very suburban. There was no lunchtime trade, and very little after-work trade. It was all dinner.
That made us really rethink restaurants. For better or for worse we thought we wanted an all-day thing. We wanted to be in south west London where we knew the clientele, so we decided to do a pubby style thing - open to everyone, young, old, mummies, kids, all the rest of it. Just really open ourselves to a wider audience.
How did you get started? We bought the Abbeville which was a pretty run down restaurant/bar in 2002. We had about £50,000 we had made from Cinnamon K and we really kept it on a shoestring for the refurbishment. We used a lot of the old tables, upholstered a lot of the old chairs. We also knocked some walls down in phases to create an open kitchen but we kept the pub open for that.
We used the local pizza delivery company down the road so that customers could order a pizza at the bar and a member of staff would go down and pick up it up for them. It was quite fun and quirky. People didn't mind it - they just realised we needed to stay open to pay for the builders.
Did you hold on to Cinnamon K? We sold it in November 2008. Once we had opened up the White Hart in Kennington, which was our third site, we shifted away from Cinnamon a little bit. All the sites are individual but we had very much moved into British food like burgers and pies and steaks. Doing this fusion Australasian thing became slightly random.
How does trading look in London for pubs? Touch wood things are going pretty well. People who are prepared to stick their neck out on creating an impressive space are holding up well. The Geronimos and Realpubs of this world have good like-for-like sales, as does Fuller's. We are about 10% up year-on-year, and have been for about the last three years.
Independent pub companies like Realpubs and Geronimo have been snapped up recently by bigger players. Would you be open to a similar deal in the future? We have done a lot of thinking about it, but with the tied leases we have got we are not as attractive at the moment. I think the key for us is to carry on doing what we are doing. Maybe we might buy some of the freeholds in five years' time. That is what Realpubs did. They got going in 2002 and they were buying freeholds in 2007. But at the moment it is quite fun just having the three of us, doing our thing, enjoying what we are doing and getting a lot of enjoyment out of the pubs rather than having other shareholders telling us what to do.
In fact, you have three tied leases and three free of tie. What do you make of the tie, given that it is quite a controversial business model? Companies like Punch are now doing very good discounts on their rents and stuff. It is pretty much like having a free of tie. On the new leases that Punch is doing you can get a £160 discount off a brewer's barrel. And if you get over its Fair Maintainable Trade (FMT) it gives you an extra £20 discount, so if the FMT is set at quite a low level because you have gone in and taken on a lease that is maybe not doing well, it is pretty competitive pricing.
Of course, if you have got 180 pubs you will be getting more than a £180 a barrel discount but if you are a one- or two-man operator you will struggle to get £180 a barrel on certain things, so some of the tied leases are potentially not as bad as everyone thinks. I feel there is still an opportunity to make money out of tied leases as an operator as long as they are good sites and they have outside space and function rooms and they are attractive buildings.
What's the mix between wet sales and food in Renaissance? We are 60-40 wet led. We are quite foody for London but not for the rest of the country. The rest of the country would probably be the other way or 70% food led. But I think because in London you have these big Friday nights, all it takes is one big Friday night and one big Saturday night with drinkers and suddenly there is this shift. On a Tuesday night it is about 50-50.
Your sites have all undergone extensive refurbishment when you have taken them on. How much do you spend on a site? We do push the boat out now. Tom Peake's father is an architect and his stepmother is an interior designer, although they are not involved, but he is very into that side of it. He is very passionate about the way things look and putting our stamp as Renaissance on a pub.
We could have just painted the walls and got some odds and sods furniture in and called it shabby chic, but that is not what we decided to do. In terms of what we spend, it very much depends on the site. At the Bolingbroke, for instance, we might have only spent £130,000 [not including the premium on the lease]. That was probably the cheapest. We spent £150,000 at the Stonhouse and £700,000 at the Avalon. At the new one, the Rosendale, we are spending £320,000.
And how do you fund that? We have a little funding from a private individual which is not never-ending and we are almost at the point where we are self-financing now. We should be able to do a pub a year and pay him back and keep 33% of the company each. We got up to over £1m in debt but we can start to chip away at that now and get ourselves in a better position.
What are your plans for the future? There has been so much chat about private equity and big companies buying little companies but at the moment we are so enjoying doing what we are doing and having each pub. We will open maybe six or seven pubs in the next five years, and get ourselves to 12 or 14 sites. And who knows where it is going to go after that.
MARK REYNOLDS' TIPS FOR STARTING A BUSINESS1 Watch for hidden costs. If you are taking on an existing business and you see a fully fitted kitchen, you are probably going to need to replace a lot of that equipment before you take it on.
2 If you take on a tied lease, check those discounts on the beer as well as what you are tied on and what you are not tied on.
3 When it comes to signing a new lease, remember that rent reviews can be based on the CPI measure of inflation, which is usually lower, and not just the RPI.
4 We always have free opening nights and invite all our friends and suppliers down. We do three mock runs and give away free food but ask people to pay for booze, just to give our staff a couple of training nights.
5 We have a "mystery diner club" on our website. If you ask your friends to review your food they forget, they are too busy, they can't be bothered or they are just too nice. Now we ask the public to join our mystery diner club and we send two people to each site per month. It costs us £70 a time, which is £700, but it is actually costing the business about £250 and the benefit is massive. You don't know them from Adam and they give you great feedback.
RENAISSANCE PUBS NEED TO KNOW Turnover £6.8m (year to April 2011)
EBITDA £1.1m (year to April 2011)
Projected turnover £8.3m (year to April 2012)
Projected EBITDA £1.4m (year to April 2012)
Staff 140, moving to 170
Average spend per head £30 per head for dinner; £14 for a pint and a burger